Differences in the Dependency Rate among the States in 1985: Implications for Development and Labor Market Policy

Abstract

The concept of the dependency rate (DR), introduced in this article, is used to analyze aggregate economic dependence in the states, using annual data for 1985. The DR is a measure of the portion of a state population that is supported, directly or indirectly, by its working population. The DR is related to the unemployment rate (UR), but the measures are conceptually and statistically distinct. The DR is first used to rank order the states, and that rank order is compared to one based on the UR. Significant differences are demonstrated in the two sets of rank orders, with implications for intergovernmental transfers that are designed to ameliorate aggregate economic distress. A regression model of the DR in the 50 states is constructed. The results from the model are used to inform economic and labor market policies in the states. The states are divided into five types of labor markets: depressed, distressed, slack, tight, and full, based on their URs and the results from the statistical model.